Life insurance, this irreformable totem – La Croix

All attempts to reform the preferred placement of the French lead to reforms. And that carried by the Pact Act is no exception to the rule.

Once again the mountain will give birth to a mouse: "I do not want to question the preferred investment stability of the French. There will be no big night of life insurance », warned Bruno Le Maire, presenting in the spring of 2018 the outline of its Bill Pact (Action Plan for the growth and transformation of businesses) in front of business leaders. Promise held: expected in a few days, the vote of the Pact Act will ultimately have a marginal impact on life insurance.

The Pact Act wants to fundamentally reform the economy

Initially, the bar had been set higher. The preferred placement of the French (€ 1,700 billion outstanding, € 22.4 billion in net inflows in 2018) is regularly put on the spot because most of the funds it stores do not finance the investment. real economy, but the financial economy.

Out of € 2,420 billion in insurer investments, all banks combined, their investments in SMEs and SMIs represent only € 77 billion (all branches combined).

A boost to "euro-growth" contracts

The 2019 novelty will boil down to a boost to "euro-growth" contracts. These products were created in 2014 to encourage policyholders to recycle funds from euro funds to SMEs through mutual funds (mutual funds, etc.).

These contracts are struggling to take off. They represent an outstanding of about 2.5 billion euros according to the scores of the French Federation of Insurance (FFA). The law will enhance their attractiveness by improving the legibility of their performances.

Some hoped for more ambitious measures. Charged by Bercy to make proposals on the financing of the economy, Alice Zagury, president of a support structure for entrepreneurs and Jean-Noël Barrot, MP MoDem, advocated to modify the rules of abatement that benefit investors after 8 years.

Solidarity life insurance remains marginal

They advised to subordinate this rebate (€ 4,600 for a single person, € 9,200 for a couple) to the effective date of each payment rather than the subscription of the contract in order to reward the actual investment period. The rapporteurs also suggested that estate benefits should be granted only after a certain number of years of asset ownership. These suggestions have fallen into oblivion.

The transferability of contracts dismissed

The transferability of contracts is another reform that has been ruled out. At the moment, it is impossible for an insured person to recover his savings and place it with another insurer without putting an end to the advantages acquired thanks to the tax precedence of the contract. In September 2018, some members proposed to blow up this ban.

Big national debate: Taxation, looking for a fairer tax

This prospect has sparked cries of fear from some insurers. Recalling that "Good use of brokerage" attaches the commissions of a contract to the one who sold it and makes it non-transferable, they also put the spotlight on the problems that would cause this transferability in the management of the reserves (mathematical reserves) that they constitute to honor their commitments .

"These management problems are real, but I think that we will have to hold a big debate on the transferability and organize it, because we must not restrain the freedom of the insureds wishing to freely dispose of their money", says Gérard Bekerman, president of AFER, one of the main associations of French savers.

A fiscal lightning rod

If insurance reforms inevitably end up in reform, it is because no one has any interest in putting the device in danger. Neither the state, which sells a portion of its debt to insurers and wants to avoid alienating a sponsor holding more than 200 billion government bonds. Neither the insurers, determined to preserve the attractiveness of the formula and solid profits. Neither insured, which despite the decline in profitability of funds in euros (about 2% in 2018), continue to plebiscite this "safe" device.

These cross-interests explain why five-star taxation and the estate benefits of life insurance are preserved from one financial law to another.

Funds in euros versus Units of account: where to place the cursor?

Because life insurance is a great fiscal lightning rod. Certainly, in 2018, the appearance of the single lump sum levy (PFU) changed habits. It has increased the taxation of large contracts, but the allowances have been maintained. In addition, the PFU has eased withdrawals of money ("redemptions") on contracts under 8 years: the gains are for example taxed at 12.8% (30% with social security contributions) in case of redemption before 4 years against 35% previously. Finally, after 8 years, the amounts withdrawn by savers are taxed at 7.5% (or taxed at the IR if the taxpayer chooses this option), a levy level of great shyness.

The other factor of attractiveness of life insurance is its inheritance benefits. Under certain conditions, it escapes the usual rules of succession. When contributions are paid before the 70e the insured person's birthday, they are exempt from inheritance tax of € 152,500 per beneficiary (20% up to € 700,000 after abatement and 31,25% above € 700,000).

Favorable regime

Even better: the "Vie Génération" contracts, which require a 100% investment in units of account (no capital guarantee), allow the legacy funds to benefit from an additional 20% discount. This discount applies before the fixed allowance of € 152,500 per beneficiary.

This favorable regime periodically makes various "think tanks" leapfrog, including Terra Nova, a circle close to the PS, which has been campaigning for years to increase the taxation of inheritance.

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Thirty-eight million beneficiaries

– In France, there are 38 million beneficiaries of life insurance contracts, who opened 54 million contracts.

– Outstanding life insurance contracts amounted to € 1.7 trillion at the end of December 2018, up 1% year-on-year. Booklet A, also popular with savers, is home to only 284 billion euros. The insurers' total investment amounted to € 2,420 billion.

Christian Parisot, chief economist at Aurel-BGC, and Bernard Le Bras, CEO of Suravenir discuss the importance of giving between funds in euros and units of account. Christian Parisot, chief economist at Aurel-BGC, and Bernard Le Bras, CEO of Suravenir discuss the importance of giving between funds in euros and units of account.